Posted on: Thursday, February 3, 2005
Google shares surge $14.06 on bullish outlook
By Michael Liedtke
Associated Press
SAN FRANCISCO — Google Inc.'s high-flying stock hit a new peak yesterday, propelled by the widening belief that the online search engine leader can continue to grow as major advertisers shift more spending from traditional media to the Internet.
After underestimating Google's robust earnings growth in its latest quarter, industry analysts substantially raised their future estimates in enthusiastic reviews that underscored Wall Street's deepening adulation for the Mountain View-based company, though some injected a note of caution.
Investors also appeared enthusiastic after digesting Tuesday's news that Google's fourth-quarter profit was seven times higher than the previous year.
Google's shares surged $14.06, or 7.3 percent, yesterday to close at $205.96 on the Nasdaq Stock Market. Earlier in the day, the shares traded at $216.80 — the highest price since Google went public less than six months ago.
American Technology Research analyst Mark Mahaney likened Google to the Michael Jordan of the Internet.
The feverish run-up in Google's market value — now standing at $59 billion — is reminiscent of the dot-com heyday of the late 1990s and early 2000 when investors bid up the prices of young Internet companies.
The biggest difference between now and then, though, is that Google is generating genuine profits. With few exceptions, the prized Internet stocks of yesteryear belonged to companies that weren't making money.
"In some respects, Google's (stock) price is out of control, but the business definitely isn't out of control," said Barry Randall, a portfolio manager for U.S. Bancorp's First American Technology Fund.
The advertising formula that Google has built around its popular search engine is the main reason investors are betting the company will continue to click. Google delivers advertising links tied to the requests entered into the main search box — a system that businesses like because they only pay when a prospective customer clicks on the link.
